Chapter 27: Sole Proprietorship and Partnership

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Sole Proprietorship
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A form of business that is owned and operated by one person
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Unlimited Liability
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Business owner is responsible for all losses experienced by the business
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General Partnership
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When two or more competent parties combine their money, labor, and skills for the purpose of carrying on a lawful business
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Articles of Partnership
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The written partnership agreement
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Partnership by Proof of Existence
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A partnership that is formed regardless of the label given to the enterprise or the intent of the parties involved
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Partnership by Estoppel
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If someone does or says something that leads a third party to believe that a partnership exists
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General Partner
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A partner that plays an active role in the management of the partnership and is publicly known as a partner; also has unlimited liability for a firm’s debts
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Secret Partner
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A general partner who has an active role in the management of the partnership, but whose connection with the partnership is kept a secret; also has unlimited liability for the firm’s debts
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Silent Partner
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A general partner who takes no active role in the management of the partnership; is also known publicly as a partner and has unlimited liability for the firm’s debts
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Dormant Partner
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A general partner who takes no active part in the management of the firm and whose connection with the firm is kept secret

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